Fairfax revisits Tony Abbott's carbon tax warnings

Last year Tony Abbott criss-crossed the country - often in a high-visibility vest - condemning the carbon tax's impact on business. He visited butchers, bakers, a guitar maker and a brickworks. And everywhere he went, he took his message of impending doom.

Nineteen months after the carbon tax was introduced - and with Mr Abbott still pushing for its repeal - what happened to the businesses the then opposition leader used as a backdrop to his relentless campaign? Were they forced to close? Sack staff? Did they witness their profits whittling away as their power bills soared?

Fairfax spoke to more than two dozen businesses that hosted Mr Abbott's pre-election visits to see how they had fared. Most would not speak on the record but those who did said costs had risen because of the carbon price and that the effect had been as bad - or worse - than they anticipated.

Sydney brick manufacturer Brickworks Ltd, which trades as Austral Bricks, was visited in September 2011 by Mr Abbott, who predicted the business would lose $2 million a year because of the carbon tax.

But things have been much worse than that, says managing director Lindsay Partridge, a Liberal Party member. ''The real cost to the business has been somewhere between $8 million and $10 million a year,'' he says. Mr Partridge maintains that in 40 years in business, 2012-13 was the worst year, with costs up by about 3 per cent.

Brickworks' statement to the ASX for the 12 months to July 31, 2013, shows it had a 9 per cent rise in revenue, and a 97 per cent rise in profit from ordinary activities after tax attributable to members.

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But Partridge admits that it was difficult to separate the cost of the carbon tax from other price rises, saying his suppliers passed the extra cost of electricity to him in the form of higher manufacturing and other costs.

And therein lies the difficulty in estimating the true cost of the carbon tax - and, on the flipside, how much repealing it would save businesses.

On Thursday, Australian Industry Group chief executive Innes Willox said it remained ''very difficult'' to separate the cost of the carbon tax from other factors driving energy prices upwards.

"The carbon tax impact has clearly been very significant in lifting electricity prices in recent years, but it is far from the only factor,'' he said. ''Even looking back now, the precise impacts of the different factors acting to lift electricity prices are very difficult to disentangle from changes in network charges and other cost changes."

In a January 2013 report on business sentiment on the carbon tax, the industry group said that it was difficult for consumers and businesses to separate the source of price rises, given that overall energy costs rose sharply in the years leading up to the carbon tax (the Productivity Commission reported that between June 2007 and December 2012, average electricity prices rose by 70 per cent in real terms, with ''spiralling network costs'' the main culprit).

In its report, the industry group said: ''It appears likely that the high profile of the carbon tax may have overshadowed other important cost drivers in electricity pricing.

''Both business and households will have seen an increase in generation costs of around 20 per cent, but final bills also incorporate substantial costs for maintaining electricity networks (poles and wires), along with state-based retail and green scheme charges.

''The Independent Pricing and Regulatory Tribunal (IPART) increased regulated electricity prices for NSW households by 18 per cent on average from July 1, 2012, with 8.9 percentage points of this increase due to carbon pricing and most of the rest due to network costs.''

But in politics, perceptions are everything. Some of the businesses Fairfax spoke to blamed the carbon tax not only as a catch-all for price rises but for the loss of contracts to overseas competitors.

When Mr Abbott visited Garden City Plastics in Victoria's Monbulk in 2011, he predicted its bills would rise by $300,000 a year under the carbon tax. General manager Graeme Wilson, who said he was not a political party member, said his bills went up ''a little bit higher than that - about $400,000''.

Mr Wilson estimated his bills had risen by about 40 per cent, his packaging by about 5 per cent and his overall costs by almost 6 per cent. He also lost a contract worth $5 million a year to an overseas competitor. ''For us, it cost us 10 per cent of our customer base; we lost to offshore one of our major customers.''

Two weeks ago, in another election campaign - this time the Griffith byelection - Mr Abbott again donned a high-visibility vest to tour a window manufacturer, claiming the business' electricity bills ''would be significantly lower if the carbon tax went''.

Mr Abbott has promised electricity bills will drop by 9 per cent if he can make good on his vow to abolish the carbon tax - something he can do only after July when the Senate switches to a mix of politicians more likely to pass his repeal. But with the carbon tax filtering through to businesses in less-than-obvious ways - and the mix of other factors pushing up electricity prices - businesses that were promised swift action to reduce bills are wondering: what happens now?

There's no doubt the carbon tax has played a part in the rising cost of electricity, but it's far from clear that Mr Abbott will be able to deliver on his promise of cheaper electricity.

A small manufacturing business owner who hosted a visit from Mr Abbott but asked not to be named, said his overheads had risen by about 15 per cent since July 2012. ''It's hidden now; you don't know how much more is from the carbon tax'', he said.

The business owner, a long-time member of the Liberal Party, predicted in 2011 that the tax would force him to sack his 16 staff and move his operations overseas. Almost three years later, he admitted he had since hired two more staff but insisted the effect had been ''100 per cent'' as bad as expected: ''I think it's been worse.''

Visiting Canberra's Unique Meats twice in his campaign, Mr Abbott warned it was ''going to be hit left, right and centre by the carbon tax''. During one visit on August 17, 2011, he warned that owner Matt Hicks - who told Fairfax he was not a member of the Liberal or Nationals parties - faced cost rises of 10 per cent under the carbon tax.

Almost three years later, Mr Hicks agreed his costs had risen by ''at least'' 10 per cent. ''You could see it right across the board.''

Mr Hicks said his power bills had risen from about $4000 to $5000 a quarter three or four years ago to $7500 now. Refrigerant has been particularly costly, he said, increasing from $50 or $60 a kilogram to about $150.

But he was disappointed in Mr Abbott. A lot of business owners had expected immediate relief from carbon pricing after the Coalition government's election. ''I think … it's here to stay,'' he said.